Market Watch: Patent Trolls, and the Bridges they Work Under
People who have some knowledge or experience in the tech industry or with copyright laws must have heard of the term “patent troll” at some point. Patent trolls are empty companies which file patents and even purchase patents from software developers, but never develop or improve the software. However, when other companies or individuals are trying develop on similar software or ideas to what the patent troll held, the patent troll will file a copyright infringement lawsuit at the companies for money. In most cases, millions of dollars can be lost if the lawsuit is. Even if the companies win, they will still need to pay a significant amount of legal fees and spend inconvenient time on patent trolls abusing legal loopholes. The list of victims by patent trolls ranges from tech giants like Google and Facebook to small startup firms. This loophole in the copyright laws needs to be fixed.
On May 22, the supreme court favored the beverage flavoring company TC Heartland in its lawsuit with Kraft Heinz. This lawsuit was about Kraft Heinz trying sue TC Heartland over product infringement. Kraft was incorporated in Delaware, and filed a lawsuit on TC Heartland, an Indiana based company. However, this case was filed in Delaware and strangely enough, since TC Heartland didn’t register as a company in Delaware, it did not count as a business, meaning the case had to be move back to Indiana. The juries ruled 8-0 favoring TC Heartland, who moved the case back to Indiana, where they soon registered as a business.
This case ruled that all patent infringement cases in the future can only can be filed where the defendant company is incorporated. At this point, location of the court should not impact that much to both companies and the result of whether or not TC Heartland violated the copyright infringement law - a completely different matter.
The ruling of a lawsuit between two food companies may also seem to have nothing to do with patent trolls in the tech industry. In fact, the supreme court just destroyed the patent troll’s lair - unintentionally at that. The patent trolls knew where to “pick the fight” and they usually picked it at the federal court district in rural East Texas, a district court held about a quarter of all copyright infringement lawsuits in the US since 2011. Meanwhile there are total 94 district courts across the US, but this one took a quarter of all copyright lawsuits filed. This is a strange pattern existing under the US legal system.
At the same time, Gilstrap, the judge of the federal court district in rural East Texas built a national reputation of favoring the plaintiff, or in this case, the patent troll. This is most likely why patent trolls filed most of their lawsuits in this court. Unsurprisingly, the patent trolls usually end up as the winner of these copyright infringement lawsuits. At the same time, there are stranger patterns that exist throughout this court. Less than 10% of its cases taken place in this court were criminal cases. This is very disproportional when comparing the stat to other courts in the country.
In other words, if a patent troll wanted to file a lawsuit against a company, they will need to “pick the fight” at where their target’s companies are located; they now have to say goodbye to their old, patent troll friendly judge Gilstrap in Texas.
With the protection of the patent troll friendly judge, there are more than 2,000 intellectual venture shell companies existing in the US since 2012, a number still growing. It was “easy money,” since all they do is to come up with software ideas, file the idea before anyone else does, and sue anyone who developed similar ideas as them. Some of them even buy patents from smaller inventors or scientists only use to sue others. As result, some of these patent trolls made billions of dollars over the course a year. They had been making profit under the unperfected laws and inhibited innovation within the US.
At the same time, the supreme court also ruled that “generically implemented software is an idea, unless there are technological improvement, or else it is not going to be patented.” This heightened what is counted as a patent. Unless the patent troll can come up with a working software or improvement, they won't be able to win lawsuits over generic software ideas. This is surely a good news for young, up-and-coming entrepreneurs with little funding and fears of fiscally thirsty patent trolls. There is now a new defense in place against them.
“These companies can be very sophisticated, very large and sometimes publicly traded,” said Robin Feldman, an UC Hastings law professor.
This minor change in the legal procedure of relocating the lawsuit’s setting impacted the tech industry dramatically. Experts in the Silicon Valley claimed that this unintentional act is going to save a lot of money for tech firms, potentially leading to an influx of innovation in the future. Patent trolls had always intimidatingly imposed themselves on both young, inexperienced entrepreneurs, and large companies alike. One copyright lawsuit is enough to destroy an innovative startup, while multiple may be able to bring down innovation of the whole country to a lethargic crawl. Now, patent trolls can no longer gather in one court shady court system and pick on other companies. Now they will be the recipients of their own game; if a firm violated the copyright infringement law, their local courts are very likely going to fine them heavily. Justice, if there was ever as clean an application as this.